NORWALK, Conn. – Scott Kimmich is trying to raise awareness of an idea he says might be useful in instances like the long-dormant 95/7 site – a switch to a Land Value Tax, which would penalize owners of undeveloped land and discourage blight in Norwalk.
“For an urban situation it’s fantastic,” Kimmich said.
To that end, District E Democrats recently had Josh Vincent of the Center for the Study of Economics in Philadelphia up for a visit, so he could be peppered by questions by a less-than-receptive group of skeptics.
“Well that was lively,” Vincent said, gaining laughter from the about 10 people present in Democratic headquarters, after an hour and a half of staving off rebuttals.
“You’d think we’d be the receptive crowd,” one man replied.
“Land value taxation, often introduced in the U.S. as a split rate property tax, is a separate tax on land as distinct from buildings, with the market value of land affected by factors such as location and size,” writes the Lincoln Institute of Land Technology, which held a conference in July for municipalities that might be interested in trying LVT.
In 2013, Gov. Dannel Malloy signed House Bill 6706, the Omnibus budget bill, which includes as Section 329 a tryout of LVT for up to three municipalities. Nothing seems to have happened since – a Google search turned up only the above-mentioned conference and a bill to extend the proposed pilot program for a year, introduced this spring and then dropped.
Kimmich arranged for Vincent to be the first guest speaker at a District E meeting, a move intended to inspire conversation and passion. It worked.
“This seems like it’s going to make my tax double and the tax on Home Depot and Walmart and all those places permanently will go way down, all to get some of the empty lots filled, which will also have fancy commercial buildings, which will also have low taxes in perpetuity,” Stuart Wells said.
“You own a house, right?” Vincent asked. “The chances are your taxes are going to go down. That’s been the result of almost every study we’ve ever done, except in suburban – ”
Multiple people questioned that. “This is so commercial will be built, so their taxes have to go down, so who’s left?” one person said.
“I’ll show you,” Vincent replied.
A Land Value Tax would increase investment and give property owners incentive to keep up their property, he said. It’s supported by “smart growth advocates including the Sierra Club,” he said.
“We’re relieving development pressure on the exurbs and a huge concern in Connecticut is the loss of countryside permanently to development as the cities become less dense and as people leave the older towns,” Vincent said.
It would help protect historic districts, he said.
“Fixing up and maintaining historic districts is a very, very expensive proposition. We were talking about tax credits, abatements, a little earlier, and how the temporary nature of those abatements can have a deleterious effect,” Vincent said. “Because this is a permanent abatement on structures, including expensive historic structures in districts, it makes it more affordable and makes the markets work in these areas. Ootherwise you would need tax credits year after year after year that other people pay for.”
The current property tax structure is barely scraping the higher land values along Route 7, Interstate 95, and the waterfront, he said.
“If people want to be (on the water) they ought to help pay for the privilege,” Vincent said. “And … 80 percent of your property tax revenue comes from what you want – buildings. Most of that would be in the old, almost pre-industrial form of Norwalk. What we want to do is sort of flip that script, so that land value that you, the community, create – you have a good school system, a good police department, you have good infrastructure, you invest a lot of money, the state invests a lot of money in roads, highways, railroads, all of that creates land value. You create land value. A property owner, a building owner, they create the value, and that’s what we’re punishing with the current tax system. So if the community creates land value, that ought to at least be the primary source, and in some places, like Sydney Australia, or Singapore, it’s the only source for municipal revenue.”
The middle class is being punished, as 92 percent of the revenue in relatively low land value areas comes from buildings, Vincent said.
“If you have a homeowner and they’re a bus driver or a nurse, they are paying more than their fair share the way the tax is set up,” Vincent said. “… The idea of land tax is to get some revenue from someplace where there will always be value and ease the burden on those who cannot afford it.”
This shift would be done gradually, spreading the impact out over a period of years, he said. “You’d see a shift to the corporate entities that are out on Connecticut Avenue, the big box stores.”
“They’re going to have to take it out of labor, or the prices of the products,” Zoning Commissioner Nora King, District E Co-chairwoman, said. “We’ll be paying it one way or the other and you know what? It’s going to make companies not want to come here and do business.”
“Well, what do we do about Main Street? You have to make a decision,” District E Co-chairwoman Galen Wells said.
“Talk about winners and losers here,” Kimmich said. “We can see that some of the losers are going to be the people with vacant lots, who are undeveloped, who are waiting around and not doing anything, and we have them right here in Norwalk. This is disgraceful, what we have here, 15 years. A land tax would get these guys going.”
“That’s relatively few owners,” DTC Chairman Ed Camacho said.
“95/7 is what I am talking about,” Kimmich said.
Norwalk’s infrastructure is being underutilized, Vincent said.
“Norwalk has all this stuff, it’s got the railroad, it’s got I95, it’s got ancillary commercial corridors, and to make the city affordable for everybody we want to use as much of it as is supposed to be used, particularly non-residential, but also what used to be called dense walkable neighborhoods,” Vincent said. “In the neighborhoods, you used to have shops, you used to have barber shops, you used to have all of that. Every city in Connecticut used to have that and every city in Pennsylvania did, and they lost all of that since World War II.”
As an example of what could happen, he showed images of Harrisburg, Pa., which he said was losing its downtown in 1982. A Land Value Tax stimulated construction of large buildings and 92 percent of the residents saw a benefit, he said.
A parking lot had been turned into a 10-story building with Class A office space, which would not have happened if not for LVT, he said.
Parking lots are often owned by out-of-towners, he said.
“They charge parking to pay their tax bill. They pay their tax bill in three or four weeks. That’s insane, with all the infrastructure you’ve got … this parking lot does not have the right to hold that land out unless they pay for the privilege of holding that land out of use,” Vincent said. “For having the nerve to put up a 10-story building that employs 300 people and added gosh knows what to the construction industry, we want them to pay through the nose. It doesn’t make sense.”